Identifier
Created
Classification
Origin
07VIENTIANE312
2007-04-17 09:54:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Vientiane
Cable title:  

AES MOVES FORWARD WITH INVESTMENT PROPOSAL FOR

Tags:  ENRG ETRD EINV EWWT ECON SENV PREL LA 
pdf how-to read a cable
VZCZCXRO7704
RR RUEHCHI RUEHDT RUEHHM
DE RUEHVN #0312/01 1070954
ZNR UUUUU ZZH
R 170954Z APR 07
FM AMEMBASSY VIENTIANE
TO RUEHC/SECSTATE WASHDC 1126
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBJ/AMEMBASSY BEIJING 2157
RHHMUNA/CDR USPACOM HONOLULU HI
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS SECTION 01 OF 02 VIENTIANE 000312 

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS BESTIC
STATE FOR EEB/ESC
STATE PASS USTR FOR DAVID BISBEE
STATE PASS TO USED WORLD BANK
MANILA FOR USED ADB
COMMERCE FOR H.P.PHO AND ADVOCACY CENTER
PACOM FOR POLAD

E.O. 12958: N/A
TAGS: ENRG ETRD EINV EWWT ECON SENV PREL LA
SUBJECT: AES MOVES FORWARD WITH INVESTMENT PROPOSAL FOR
MEKONG HYDROPOWER PROJECT

REF: VIENTIANE 133

THIS CABLE IS SENSITIVE BUT UNCLASSIFIED (SBU). PLEASE
HANDLE ACCORDINGLY.

UNCLAS SECTION 01 OF 02 VIENTIANE 000312

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS BESTIC
STATE FOR EEB/ESC
STATE PASS USTR FOR DAVID BISBEE
STATE PASS TO USED WORLD BANK
MANILA FOR USED ADB
COMMERCE FOR H.P.PHO AND ADVOCACY CENTER
PACOM FOR POLAD

E.O. 12958: N/A
TAGS: ENRG ETRD EINV EWWT ECON SENV PREL LA
SUBJECT: AES MOVES FORWARD WITH INVESTMENT PROPOSAL FOR
MEKONG HYDROPOWER PROJECT

REF: VIENTIANE 133

THIS CABLE IS SENSITIVE BUT UNCLASSIFIED (SBU). PLEASE
HANDLE ACCORDINGLY.


1. (U) This is an action request. Please see paragraph
seven.


2. (SBU) Summary: Econoff met March 29 with AES
representatives Flora Zhao and Jasper Camacho to discuss
their proposal for a run of the river hydropower project on
the Mekong River. AES submitted the proposal March 29 to the
Government of Laos (GOL),accompanied by a strong letter of
support from the Ambassador. AES' planned investment is
approximately $1.3-$1.5 billion on a stretch of the Mekong
within Laos. Post has previously assisted AES in arranging
meetings with senior GOL officials, working level experts,
and local hydropower contacts. AES has also engaged the
Advocacy Center in Washington, having been told by a contact
within the GOL that the decision is likely to be made at the
end of April. The contact also suggested a number of points
the United States Government (USG) should use in further
lobbying efforts. To date AES is the largest U.S. company to
make a serious attempt at large-scale investment in Laos.
End Summary.


3. (SBU) On March 29 Econoff met with Flora Zhao, Director
of Development, and Jasper Camacho, Development Associate, of
AES' Singapore office. AES is a multi-billion dollar
Arlington, VA-based independent power producer (IPP). Flora
and Jasper reported they were en route to a meeting with
Khankham Sengaphay, Director of the Planning, Monitoring, and
Evaluation Division of the Committee for Planning and
Investment (CPI) of the GOL. They subsequently delivered to
Khankham the initial proposal for their planned $1.3-$1.5
billion, 1260 megawatt (MW) run of the river hydropower
project at Xayabury, along a stretch of the Mekong located

entirely within Laos. AES is planning to sell the majority
of the power to Thailand and possibly Vietnam. A number of
companies are competing for this project, which would be the
first hydropower project in Laos on the Mekong, not one of
its tributaries. According to AES, two Thai companies have
already submitted proposals for the same project, one of four
planned hydropower projects on the Mekong in Laos. In
addition, SinoHydro of China has previously offered to
develop all four of the projects, with Chinese financing that
would likely carry none of the safeguards written into Asian
Development Bank (ADB) and World Bank (WB) funded projects
such as Nam Theun II.


4. (SBU) The Ambassador previously accompanied AES
executives to meetings with a wide range of senior GOL
officials, such as the Minister of Commerce and the Minister
of Energy, and post assisted AES in making contact with
working-level Lao hydropower experts and other contacts
involved in the hydropower industry. One of our contacts,
who recently returned from a USTDA funded orientation visit
to the United States focused on hydropower, told AES the
decision on the Xayabury project would likely be made at the
end of April and would be political in nature. The contact
recommended AES try to engage higher level USG officials to
lobby on behalf of its project. To this end AES has
contacted the Advocacy Center in Washington and is seeking a
letter from the Secretary of Commerce.


5. (SBU) Our contact recommended to AES the following
points be made to the offices of the Prime Minister, to
Deputy Prime Minister Somsavat Lengsavad, and to President of
CPI Soulivong Daravong:
1) AES has experience developing large-scale power projects
around the world.
2) AES will not have difficulty raising financing for the
project. (Note: AES has previously spoken to the ADB in
Manila, and ADB officials have indicated their interest in
providing financing. End Note.)
3) This is the first time a large U.S. company has shown a
strong interest in investing in Laos. If successful, more

VIENTIANE 00000312 002 OF 002


American FDI will follow.

4. U.S. technical assistance may come with the project.

5. The U.S. Trade Development Agency (USTDA) is providing
technical assistance to AES in Vietnam for a large power
generation project.


6. (SBU) Comment: If AES is awarded the rights to develop
the Xayabury project, it would instantly raise the profile of
American investment in Laos. Currently, the stock of U.S.
investment in Laos is generously estimated to be $15 million.
AES' success might also signal to the GOL that normal
trading relations, granted by the United States in 2004, is
starting to provide the economic growth opportunities so far
hoped for, but not yet seen. If SinoHydro develops the
project, it would represent another coup for the growing
Chinese commercial presence in Laos, and also indicate the
GOL, despite recent efforts to better account for
environmental concerns in mining (reftel),has not
transferred that concern to hydropower. Barring an unforseen
change of heart, SinoHydro would not feel bound to respect
any of the environmental, financial, or transparency
standards set with NT-2. End Comment.


7. Action Request: We request the Department support AES'
request for a letter from the Secretary of Commerce in
support of the project. The Ambassador would hand deliver
the letter when finalized.
HASLACH